Monetizing dormant domain names by a license agreement
Of the 348.7 million domain names registered (Verisign.com, The Domain Name Industry Brief, Vol 16, Issue 1, March 2019), many of them are dormant: either they are not activated or, if they are, they only designate a parking page. There is another way to monetize a domain name: the license agreement. Admittedly, this solution can only be applied in particular cases and, in any event, certainly not in the presence of a situation clearly falling under cybersquatting. However, for registrants of domain names composed of an acronym, a generic word, or generic word sequence, the license agreement may be an advantageous solution. As for the licensee, he may find an interest, especially when the conditions of eligibility for registration of a ccTLD are lacking. This article is not intended to provide answers to all the contractual issues that may arise, but to draw attention to the specifics of such a contract.
A long-term strategy. The situation assumes that the holder of the domain name, who does not wish to give it up, prefers to bet on a long-term revenue strategy. The implementation of a license in such a context may be advised in particular if the objective economic value of the domain name on the market, at a “T” time, is considered insufficient by the holder.
The duration of the license agreement. “Long-term strategy” does not mean that the duration of the license agreement must be long. Indeed, a short and renewable contract is preferable. A contract of too long duration would immobilize the domain name: its holder would be bound by a strategy which, at any moment, could become obsolete and deplorable. Among the possible scenarios is the advent of a new brand. Indeed, the filing of a trademark identical to a domain name mechanically increases the value of the latter. It is therefore advisable for the licensor to give himself a certain margin of responsiveness in the event that a great sale opportunity arises.
The counterpart of the license agreement. Most often, the consideration is in the form of royalties: a flat fixed value or royalty percentage. Royalty percentage is most often a percentage of the revenue generated by the website. A mixed mode of remuneration is also possible: fixed value and royalty percentage. In addition to royalties or as an alternative to royalties, the licensor may consider being allocated shares in a the licensee’s corporation.
One or more domain names? It is not uncommon for the holder of a domain name registered under such extension also to have in his portfolio identical or similar names registered under other extensions. To avoid unpleasant surprises, it is imperative that the licensee ensure that the licensor declares all the similar or identical domain names. Ideally, the license agreement should cover a set of similar or identical domain names.
The management of the domain name(s). The licensor must maintain control over his portfolio. Nothing justifies that the licensee takes control over the domain name(s).
Dispute resolution. In the presence of a contract, the UDRP-type procedures are closed. Therefore, the parties are advised to settle their dispute by mediation and/or arbitration.